The worst kept secret in the state is the fact that the state budget is highly dependent upon the oil extraction tax to fund it. From special savings like the Legacy Fund to the special projects like the Prairie Dog bill, North Dakota has for the past decade utilized the natural resources found in the Bakken shale to make the state successfully funded and encourage growth. Now, as COVID-19 continues to cause problems around the world, its impact on the oil market has brought home how devastating this is.
Late April saw the price for oil crash amid a supply glut caused from lack of demand because of COVID-19 and price wars between Saudi Arabia and Russia. The reference point for oil prices, U.S. West Texas Intermediate (WTI) crude oil, was being traded at a negative value of $37. Not only is this a historical first, it's incredibly bad news for North Dakota which collects 53 percent of its revenue from severance taxes.
For the City of Langdon, looking ahead to budget time is not as hopeful as it was this past winter. Langdon City Auditor RoxAnne Hoffarth budgeted to receive around $315,000.00 from the state this year. Typically, the state will send a report on what local governments can expect to receive for the following year around budget time. While the drop in oil prices isn't new, with a decline occurring for the past five years, this drastic of a decrease could have significant impact on the State's ability to help small municipalities like Langdon.
“It had decreased or stayed the same for the last few years. General fund and street department receive about 50/50. The street department depends most on state revenue and the general fund. Our street department relies on this money to run because they are not an enterprise fund, meaning they have no way to make their own money,” explained Hoffarth.
Despite the fear of what may occur at the state level for budgets and funding, Hoffarth did have good news to share. COVID-19 may have caused the bottom to drop out of oil, but the reduction in travel has brought a significant increase to local taxes.
“Our city sales tax is up $16,000 this April from last year at the same time. So it seems people are staying local and shopping local. Keep up the good work Langdon residents,” Hoffarth shared.
Langdon City Commission Chair Jerry Nowatzki shared that while at first he was worried about the city sales tax being down due to the COVID madness – the reluctance to leave homes and have things shipped to doorsteps instead – has turned out to be a non-issue. With residents no longer traveling to larger cities, their sales tax dollars stayed local and working out well for the city as it looks to making a balanced budget.
"Shop Local. I can't say that enough,” Nowatzki said.
The downturn in state revenue comes at a time when the Langdon City Commission and Hoffarth are also looking into restructuring the city utility billing for business who rent space from another business. Nowatzki explained that the main issue with this is how will the new numbers fit into the budget and what would that affect. Finally, they also look at employee raises.
“We have an outstanding group of city employees who have gone without even a small cost of living bump in wages for two years, so I'd like to be able to give them a raise they all deserve,” Nowatzki said.
With so much going on, the amount of stress on many local governing bodies to meet their budgets has increased. In Langdon, Nowatzki shared that his predecessors have always done an excellent job at keeping money in reserve funds for such instances. Hoffarth explained that the city relies on the property tax, income and the enterprise funds to support the city through rough times such as this.
“I’m a geek. I love working on the budget, but it’s difficult to balance when you don’t have guaranteed funding. You can only estimate and hope you get close to that amount in the end,” Hoffarth said.
In the meantime, Nowatzki and his fellow commissioners have a list of priorities that they want to accomplish. It begins with finishing the existing water, sewer, & street projects as the unusually early winter last October really set that back. Further out are plans to look into getting all the streets in Langdon fully resurfaced. What lands as most imminent for the Commission is getting back to holding in-person meetings.
“It will also be nice to get back to having meetings in City Hall.
The COVID induced social distancing actually hit at the same time we are having City Hall renovated,” Nowatzki shared. “Using internet services like Zoom for commission meetings gets the job done, but it's just not that same. I'll be glad when we're all back in the same room.”